Special Needs Estate Planning


What is a Special Needs Trust?

A Special Needs Trust allows parents to provide additional financial support for a child with disability, above and beyond the child’s government benefits. Attorneys have developed techniques to provide this assistance without jeopardizing the child’s right to government benefits.

For whom is a Special Needs Trust appropriate?

A Special Needs Trust is appropriate in any family where a child has a mental or developmental disability, regardless of age, guardian status or the residence of the child.

How large an estate must I have to justify an estate plan and/or a Special Needs Trust?

 Even families with modest wealth should have an estate plan. Real estate, life insurance and other death benefits are ultimately distributed to others, usually after the death of the second parent.

Timely planning allows the parents to name the person who will settle their estate, suggest a guardian for minor children, and prevent unnecessary taxation and excessive costs of administration.

How does a Special Needs Trust work?

A pre-determined portion of the parents’ assets is set aside to enhance the quality of the child’s life. These funds are used to supplement — not replace — the government benefits of food, clothing and shelter.

Aren’t government benefits sufficient?

Your child will have additional needs beyond food, clothing and shelter. The government does not provide for vacations, travel costs to visit family, or a television for your child’s room. The government does not support your child’s educational or entertainment interests. A Special Needs Trust can provide these things.

How does my child receive the benefits provided by a Special Needs Trust?

 A trust requires the appointment of a trustee (an individual or a bank) to manage investments. The grantor (you) can also name a personal trust advisor or advocate, someone from the family with a personal interest in the child’s welfare. The advisor or advocate advises the trustee of the child’s needs. The trustee is impowered to provide those things which the government does not.

What happens to my child (children) and my assets if I don’t have an estate plan?

When someone dies without leaving a will (or a will integrated with one or more trusts), the deceased is said to have died intestate. The law of the state where the decedent resides determines to whom the estate will be distributed and in what proportions. The judge and the probate court appoint a trusted person (frequently a relative), to settle the decedent’s affairs and distribute assets among the survinving relatives. In such cases, money and property are distributed according to a fixed legal formula under the Statute of Descent and Distribution.

Money which passes to a minor is placed under the control of a guardian. This person must report to the court periodically until the money is distributed to the minor at age 18. Money which passes to an adult child with a mental or physical disability will, if there is no guardian, become that individual’s personal money. Money in guardianship or held personally is subject to spend down provisions of some public benefit programs.

How will I know if the law changes and I need to make revisions to my estate plan or Special Needs Trust?

Maintain your affiliation with support groups, public agencies and newsletters that monitor these developments.

Are all special needs trust essentially the same?

No, they definitely are not all the same. There are private, third party discretionary special needs trusts, several varieties of pooled trusts, supplemental services trusts, Medicaid payback trusts and combinations of these. Trusts can be revocable or irrevocable, living or testamentary. A knowledgeable lawyer can familiarize the family with these distinctions for your unique situation.

What are pooled trusts? Is there a pooled trust program in Ohio?

Pooled trusts are a valuable tool in special needs planning. The Community Fund Management Foundation, a non-profit organization, manages three Ohio pooled trusts. One trust is for parents who are doing estate planning for their special needs child. Two trusts are Medicaid payback trusts which serve as a protected setting — in other words, a non-countable resource for Medicaid and Social Security purposes — for a benefit recipient’s own money.

Ohio Medicaid rules allow a Medicaid recipient to have only $1,500.00 in countable assets. A Medicaid payback trust allows an individual with a disability to set aside his or her additional money in a trust that provides for services and products that the government does not provide, all without jeopardizing eligibility for government benefits.

These pooled trusts were authorized by federal legislation in 1993. The Foundation does not accept an application without the participation of a lawyer because it is essential that the family understands the purposes and particulars of the trust and how it must be integrated into an overall family estate plan.

What else do I need to know?

Before you consult with an attorney, take an inventory of your assets. Don’t forget assets such as life insurance, which will only comes into being at the time of death. Be prepared to tell the attorney if the assets are held in individual names or joint names.

Expect your attorney to inquire at length about the unique mental and psychological condition of your child. Be prepared to share your observations and expectations candidly.

Consider carefully the people you will be naming to settle your estate or serve as a guardian of a minor child. You will also be choosing a qualified individual or a bank to serve as the trustee of one or more trusts. In the case of a Special Needs Trust, you will also be naming a trust advisor.

The trust and your overall estate plan should be tailored to your unique needs. Frequently, there are other children in the family whose needs must be considered. There may be estate tax concerns as well.

Sometimes children with disabilities already have assets of their own. Perhaps the child has been left money from a grandparent, accumulated savings or obtained a settlement in a personal injury litigation. These assets will be subject to spend down requirements unless financial and estate planning action is taken before the person requires government benefits.

For a child with disability, future quality of life depends upon the parents. Creating a plan now will secure the future for a beloved child who cannot do so alone.

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